unit 5 (3 questions)

In search of higher returns, many investors have turned to structured products such as structured notes. Your clients need to be aware that these are complex instruments that have which of the following characteristics?

Credit or default risk because they are unsecured obligations of the issuing institution, Limited or no liquidity

Which of the following is NOT registered with the SEC under the Investment Company Act of 1940?

Exchange-traded notes

In discussing a direct participation program with your customer, rank the following items in order of importance from most to least.

Potential for economic gain, Tax write-offs, Liquidity and marketability

Exchange Traded Notes (ETNs)

are debt instruments in which the issuer promises to pay a return based on the performance of a specific debt index after deducting specified fees.

Your client who owns a DPP that generated a $10,000 passive loss for the year could

only deduct the passive loss against passive income.

When a client is interested in investing in commodities, you would expect to discuss

soybeans, wheat, and corn.

Among the differences between an investment in a limited partnership offering and in a corporation is that

limited partnership offerings do not pay dividends; corporations do.

In order to achieve its goals, an inverse ETF uses

derivatives and debt. An inverse ETF will almost always use derivatives, such as options, and—in the case of a leveraged ETF—will use debt, primarily in the form of margin. Inverse ETFs do not engage in short selling; they are an alternative to selling short a specific index without the unlimited risk potential of the short sale. Arbitrage is used, typically by institutional investors, to take advantage of temporary imbalances between the ETF's net asset value and market price.